Correlation Between Huntington Ingalls and Axon Enterprise

Can any of the company-specific risk be diversified away by investing in both Huntington Ingalls and Axon Enterprise at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Huntington Ingalls and Axon Enterprise into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Huntington Ingalls Industries and Axon Enterprise, you can compare the effects of market volatilities on Huntington Ingalls and Axon Enterprise and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Huntington Ingalls with a short position of Axon Enterprise. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huntington Ingalls and Axon Enterprise.

Diversification Opportunities for Huntington Ingalls and Axon Enterprise

-0.82

Correlation Coefficient

Huntington Ingalls  Axon Enterprise

Pay attention - limited upside

The 3 months correlation between Huntington and Axon is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Huntington Ingalls Industries and Axon Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axon Enterprise and Huntington Ingalls is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Huntington Ingalls Industries are associated (or correlated) with Axon Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axon Enterprise has no effect on the direction of Huntington Ingalls i.e., Huntington Ingalls and Axon Enterprise go up and down completely randomly.

Pair Corralation between Huntington Ingalls and Axon Enterprise

Considering the 90-day investment horizon Huntington Ingalls Industries is expected to under-perform the Axon Enterprise. But the stock apears to be less risky and, when comparing its historical volatility, Huntington Ingalls Industries is 1.07 times less risky than Axon Enterprise. The stock trades about -0.13 of its potential returns per unit of risk. The Axon Enterprise is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  35,516  in Axon Enterprise on September 3, 2024 and sell it today you would earn a total of  28,123  from holding Axon Enterprise or generate 79.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Huntington Ingalls Industries  vs.  Axon Enterprise

Huntington Ingalls

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huntington Ingalls Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Axon Enterprise

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Axon Enterprise are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Axon Enterprise displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Huntington Ingalls and Axon Enterprise

The main advantage of trading using opposite Huntington Ingalls and Axon Enterprise positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Huntington Ingalls position performs unexpectedly, Axon Enterprise can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Axon Enterprise will offset losses from the drop in Axon Enterprise's long position.

The idea behind Huntington Ingalls Industries and Axon Enterprise pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.